2001 3Q Exec Ipa

Slide1: New England Pension Consultants Oklahoma State Pension Commission Investment Performance Analysis Quarter Ending 9/30/2001
Table of Contents: Table of Contents > Market Environment > Asset Allocation / Investment Policy Targets > Performance Summary > Performance Detail 1. Teachers 2. PERS 3. Firefighters 4. Police 5. Law Enforcement 6. Judges & Justices 7. Department of Wildlife
Market Environment – Third Quarter 2001: DOMESTIC MARKETS INTERNATIONAL MARKETS Market Environment – Third Quarter 2001 The defining moment of the third quarter was unquestionably the terrorist attacks on September 11th. Domestic equity markets began the third quarter on a strong note, but were marred by continued concerns of economic weakness and lackluster market performance. The S&P 500 lost 14.7%, while the Nasdaq Composite suffered its worst decline in the history of the index (30.6%). As investors sought safety in traditionally stable companies, value stocks outperformed growth stocks. The Russell 1000 Growth Index returned –19.4%, while the Russell 1000 Value returned –11.0% during the third quarter. Small cap stocks were down 20.8% for the quarter. The Russell 2000 Growth Index posted a loss of 28.1%, compared to a loss of 13.3% for the Russell 2000 Value Index. Bonds rallied during the third quarter in the face of fears of economic recession, coupled with concerns over declining corporate profits. The Lehman Aggregate Index returned 4.6% in the third quarter with Treasuries, Agencies and Mortgages leading the way. International equity markets lost ground due to concerns over mixed signals about the global economy prior to the terrorist attacks. The MSCI EAFE Index fell 14.0%, despite the world’s central banks adding liquidity to their respective markets and a rally in the final week of the quarter. The financials, consumer cyclicals and capital goods sectors led the fall and most countries participated in the drop. Despite repeated action by the Bank of Japan to inspire growth, their equity market fell 21.9% in local currency. The MSCI Emerging Markets Index returned –21.6% for the quarter. Emerging markets underperformed the developed markets during the third quarter as risk aversion on a global scale drove the market. Global bonds returned 7.2% for the quarter as the U.S. dollar’s strength finally began to wane. While European bonds provided the best quarterly returns due to the strong rally in the euro, all countries posted positive returns in U.S. dollars.
Growth versus Value: Growth versus Value Equity Fixed Income
Market Environment – Third Quarter 2001: Market Environment – Third Quarter 2001
Market Environment – Third Quarter 2001: Market Environment – Third Quarter 2001
Market Environment – Third Quarter 2001: Market Environment – Third Quarter 2001
Slide8: Investment Policy Asset Allocation Targets
Relative Size - All Funds: Relative Size - All Funds (Dollars in 000,000)
Equity Commitment: Equity Commitment (as of 9/30/01)
Risk / Return Analysis : Risk / Return Analysis Total Public Funds – Total Return vs. Risk - 5 Years Ending 9/30/01 S&P 500 LB Aggregate Teachers PERS Firefighters Police Law Judges Wildlife
Composite Performance : Composite Performance Periods Ending September 30, 2001
Composite Performance : Composite Performance Years Ending September 30, 2001
Slide14: For each Total Fund actual return we report to you, if we have available information, we also construct two hypothetical returns: A Policy Index return and an Allocation Index return. These two hypothetical returns are useful in diagnosing to what factors the total return can be attributed. The Policy Index is merely the return the Fund would have had if the policy target allocation had been strictly adhered to and each asset class investment would have been in an index fund for that class, rather than with an active manager. The Allocation Index is the return the Fund would have had using the actual allocation of the Fund and index returns, as above with the Policy Index. NOTE: These tools are most useful over longer time periods and are not particularly useful over the short run. Looking at the Policy Index for longer term returns gives us a base-line. What part of the Fund’s return can be attributed to being in the right asset classes? For example, the Teachers Fund ( following page) Policy Index “return” of 8.1% for the last five years accounted for the majority of the actual return of 9.9% for that time period. This is not surprising and is as it should be. Policy decisions (what asset classes to be in and to what extent) are the most important decisions a Fund’s Board makes. Turning to the Allocation Index. What information does this add? Remember, that the only difference between it and the Policy Index is that we let the allocation “drift” away from the target to the same extent as actually occurred. Then, the difference in return (in this example 9.7%-8.1%) can be attributed to this allowed drift. In this time period, letting asset classes drift beyond their targets added considerable value. Lastly, we compare actual return to the hypothetical Allocation Index return to see what contribution was made by active management.. Here we see that very little value was added during this time period (9.9%-9.7%). This is not an indictment of the Fund’s managers but a reflection of the type of market that we have just been through, where indexing was a very successful strategy, as was letting one’s winners “run” (asset class drift). Customized Indices: Policy and Allocation
Teachers Total Return : Teachers Total Return Periods Ending September 30, 2001 Years Ending September 30, 2001
Teachers Total Return vs. Risk: Teachers Total Return vs. Risk Total Public Funds 5 Years Ending September 30, 2001
PERS Total Return : PERS Total Return Periods Ending September 30, 2001 Years Ending September 30, 2001
PERS Total Return vs. Risk: PERS Total Return vs. Risk Total Public Funds 5 Years Ending September 30, 2001
Firefighters Total Return : Firefighters Total Return Periods Ending September 30, 2001 Years Ending September 30, 2001
Firefighters Total Return vs. Risk: Firefighters Total Return vs. Risk Total Public Funds 5 Years Ending September 30, 2001
Police Total Return : Police Total Return Periods Ending September 30, 2001 Years Ending September 30, 2001
Police Total Return vs. Risk: Police Total Return vs. Risk Total Public Funds 5 Years Ending September 30, 2001
Law Total Return : Law Total Return Periods Ending September 30, 2001 Years Ending September 30, 2001
Law Total Return vs. Risk: Law Total Return vs. Risk Total Public Funds 5 Years Ending September 30, 2001
Judges Total Return : Judges Total Return Periods Ending September 30, 2001 Years Ending September 30, 2001
Judges Total Return vs. Risk: Judges Total Return vs. Risk Total Public Funds 5 Years Ending September 30, 2001
Wildlife Total Return : Wildlife Total Return Periods Ending September 30, 2001 Years Ending September 30, 2001
Wildlife Total Return vs. Risk: Wildlife Total Return vs. Risk Total Public Funds 5 Years Ending September 30, 2001
Slide29: Each domestic equity manager’s portfolio is loaded into NEPC’s system (stock by stock) and the portfolio is compared to all other portfolios in the universe. The portfolio receives a “score” based on the overall size and style of its holdings. Why?… --Size and style are two of the most important decisions a manager makes. --Acts as a check on manager consistency over time. --Offers an opportunity to compare relative performance with peers. --Assists in diversifying the overall fund equity exposure. Calculations… --Size is measured by how far above or below the universe median a manager’s portfolio falls. --Style gives consideration to: book to price, earnings growth, earnings to price and yield. Each these factors is captured from the latest reported data. Results… --The size and style scores allow each manager (or fund Composite, when summarizing) to be placed into one of nine peer groups (three by size times three by style). Comment… --No methodology captures all of the complex decisions a manager makes but this exercise offers one more analytical tool. Size and Style
Style Analysis : Style Analysis Equity Style Analysis as of September 30, 2001
Teachers Performance : Teachers Performance Periods Ending September 30, 2001
PERS Performance : PERS Performance Periods Ending September 30, 2001
Firefighters Performance : Firefighters Performance Periods Ending September 30, 2001
Police Performance : Police Performance Periods Ending September 30, 2001
Law Performance : Law Performance Periods Ending September 30, 2001
Judges Performance : Judges Performance Periods Ending September 30, 2001
Dep’t of Wildlife Performance : Dep’t of Wildlife Performance Periods Ending September 30, 2001
Teachers Retirement System: Teachers Retirement System Assets in ($000)
Teachers Performance : Teachers Performance Periods Ending September 30, 2001
Teachers Performance : Teachers Performance Periods Ending September 30, 2001
Teachers Performance : Teachers Performance Equity Managers Ranked Against Their Peer Groups Periods Ending September 30, 2001
PERS: PERS Assets in ($000)
PERS Performance : PERS Performance Periods Ending September 30, 2001
PERS Performance : PERS Performance Periods Ending September 30, 2001
PERS Performance : PERS Performance Periods Ending September 30, 2001
PERS Performance : PERS Performance Equity Managers Ranked Against Their Peer Groups Periods Ending September 30, 2001
Firefighters: Firefighters Assets in ($000)
Firefighters Performance : Firefighters Performance Periods Ending September 30, 2001
Firefighters Performance : Firefighters Performance Periods Ending September 30, 2001
Firefighters Performance : Firefighters Performance Equity Managers Ranked Against Their Peer Groups Periods Ending September 30, 2001
Police: Police Assets in ($000)
Police Performance : Police Performance Periods Ending September 30, 2001
Police Performance : Police Performance Periods Ending September 30, 2001
Police Performance : Police Performance Periods Ending September 30, 2001
Police Performance : Police Performance Equity Managers Ranked Against Their Peer Groups Periods Ending September 30, 2001
Law Enforcement : Law Enforcement Assets in ($000)
Law Performance : Law Performance Periods Ending September 30, 2001
Law Performance : Law Performance Periods Ending September 30, 2001
Law Performance : Law Performance Equity Managers Ranked Against Their Peer Groups Periods Ending September 30, 2001
Judges & Justices: Judges & Justices Assets in ($000)
Judges & Justices Performance : Judges & Justices Performance Periods Ending September 30, 2001
Judges & Justices Performance : Periods Ending September 30, 2001 Judges & Justices Performance
Judges & Justices Performance : Equity Managers Ranked Against Their Peer Groups Periods Ending September 30, 2001 Judges & Justices Performance
Department of Wildlife: Department of Wildlife Assets in ($000)
Wildlife Performance : Wildlife Performance Periods Ending September 30, 2001
Wildlife Performance : Equity Managers Ranked Against Their Peer Groups Periods Ending September 30, 2001 Wildlife Performance

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